Will Tax Advantages Bring Gaming Company Headquarters To Macau?

Will Tax Advantages Bring Gaming Company Headquarters To Macau?

2/13/2008

Macau currently is the largest gaming market in the world. Gaming companies (license holders or gaming operators) invest billions of U.S. dollars in projects in Macau, yet gaming manufacturers are not investing heavily in the territory.
Card, slots, software, equipment manufacturers and other gaming-related vendors do not want to invest in Macau. If gaming equipment manufactures want to provide services such as installing equipment, Macau law requires they register with the Finance Bureau, (a M/1 form). Furthermore, they are authorized to perform work in Macau only up to a maximum of 45 days within a period of six months. This time frame already has caused vendors and gaming operators to incur losses because vendors were not able to provide services needed by gaming operators within the time frame.
However, from Macau it is easier to reach other new Asian markets, such as Singapore, Taiwan and Vietnam, than if the company does business in Las Vegas, Atlantic City, London or even Sydney. If the workforce is located in Macau, the vendor will be able to save time (due to the time difference), as well as money in airfares, mail, faxes, telephones and, in some cases, rent.
Macau also offers tax advantages. Employees located in Macau theoretically are liable to a maximum of 12% income tax. However, applying the sliding scale, the true rate will be around 9%. According to the Macau Chief Executive, these tax rates will be even lower next year. The employee will receive more money but the company will pay less compared with Australia or Europe. Additionally, up to a certain limit even U.S. citizens can benefit from the low Macau tax rates. This allows companies to hire the best employees while saving money in salaries.
Social Security payments are extremely low. The company must pay MOP 30 per local worker per month and MOP 45 per month per non local worker. (MOP 45 is around Euros 4.50 per month).
Complementary Income Taxes (the taxes paid by companies) are applied at a progressive rate, from 3% to 12% for taxable profits above MOP 300,000 (around Euros 30,000). However, once again the taxes are paid on a sliding scale, so the actual rate will be below 12%. The Macau Government can reduce the Complementary Income Taxes by 50% if the company promotes economic diversification and/or contributes to promotion of exports to new unrestricted markets. Tax exemptions may be granted upon application, detailing grounds with a statement of facts, to projects that comply with at least one of the requirements.
I believe we will see gaming manufacturers transfer business centers, production centers and business development centers to Macau because of these and other advantages. In some cases, companies will gain a strong competitive advantage by transferring their headquarters to Macau. While this topic will be covered in a separate article, perhaps we will see some legal changes that will bring advantages to local gaming equipment manufacturers and vendors. Why pay more for less if your company can pay less for more?
Antonio Ramirez
Ramirez Law Firm
Rua Dr. Pedro Jose Lobo, Edificio Infante, 18 Andar, Macau
antonio.ramirez@ramirezlawfirmacau.com
Phone: (+853) 2871 6221
Fax: (+853) 2871 6219
Mobile: (+853) 66681771